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Forbes Container Line Pte. Ltd. Versus ADIT - (Intl. Taxation) -3 (2) Mumbai

2016 (3) TMI 1097 - ITAT MUMBAI

Chargeability of income u/s.44B - existence of Permanent Establishment (PE) - DTAA - Held that:- We find that assessee had not claimed exemption of Article 8 of the DTAA as it was not in the shipping business.Therefore, the income of the assessee had to assessed as per the provisions of tax treaty which deals with business income.Here,we would like to mention that FAA was not justified in confirming the order of the AO holding that provisions of sec.44B of the Act would be applicable with regard .....

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hat the income of the assessee was to liable to be taxed as business income and that in absence of PE no income was taxable in India, that the provisions of section 44B were wrongly invoked by the AO. Reversing the order of the FAA, we decide effective ground of appeal in favour of the assessee. - ITA No.1607/Mum/2014 - Dated:- 11-3-2016 - S/Sh. Rajendra,Accountant Member & Ram Lal Negi,Judicial Member Assessee by : Shri Girish Dave Revenue by : Shri Ajay Modi Order u/s.254(1)of the Income- .....

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The Assessing Officer (AO)completed the assessment,u/s.144(3)r.w.s 143(3) of the Act on 9.2.12,determining the income of the assessee at ₹ 2.97 crores, holding that the business of the assessee was covered by the provisions of section 44B of the Act. 2.The first effective Ground of Appeal is about chargeability of income u/s.44B of the Act and existence of Permanent Establishment (PE).During the assessment proceeding the AO found that FCLhad entered into an agency agreement with M/s.Volkar .....

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see was arising out of operation of ships in International traffic,that income arising /accruing to it was taxable in India as per the provisions of section 5(2) of the Act, that the provisions of Section 44B of the Act were applicable for the income earned by the assessee during the year under consideration.He referred to various case laws and held that the assessee had entered into agency agreement with associated concerns regarding business from India, that there remained an element of contin .....

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tities was in India ,that the assessee had business connection in India.The AO referred to Articles -7 & 5 of the DTAA and held that the assessee had carried on part of business to a fixed place of business,that it fell within definition of PE under paragraph-1 of Article-5, that the assessee had fixed a permanent place in India from where it used to secure its business, that the office of the agent was fixed place for tax treaty purposes. The AO directed the assessee to explain as to why it .....

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oading and unloading, maintaining and operating bank account, that the assessee had PE in India within the meaning of Article-5 of the DTAA, that the income of the assessee was taxable under Article-7 of the treaty,that income of the assessee was assessable in India as per the provisions of section 44B r.w.s 5(2) of the Act, that the section 44B dealt with computing with profits and gains of shipping business of non residents,that business income of the assessee arising in India was to be taxed .....

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O had rightly held that assessee had business connection in India, that management and control of the company was handled by the parent company, that the parent company was indulging in all kind of activities in India on behalf of the assessee, that it was collecting freight on behalf of the appellant and was maintaining bank account, that the assessee had a business connection in India and it is also an Agency-PE as well as fixed place of PE in India,that the management was with parent company .....

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d to paragraph 10 of the Article 5 of the DTAA.With regard to Agency-PE, he referred to page No.63 and 65 of the PB and stated that only 2.29 % of the revenue was received from Indian company,that the substantial portion of income for the year under consideration was not from parent company.He further contended that the assessee was an independent entity,that it would take its own decision at Singapore that HO had no role in deciding the policies of the assessee,.He referred to case of Radha Ran .....

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Taxmann.com24).The Departmental Representative (DR) argued that place of management of the company was in India,that the effective management was controlled by the parent company, that one of the directors was director in the parent company also, that only one Board meeting took place in Singapore, that the assessee was having PE in India, provisions of section 44B would be applicable. 5.We have heard the rival submission and perused the material before us.We find that the assessee company is a .....

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t details about the Director handling the business at Singapore were submitted before the AO. It had also filed details of remuneration paid to Padmakumar Unnikrishnan (pg-56 of the PB).The assessee had,vide its letter dt.20.12.2011 (pg-53 of the PB),submitted a copy of minutes of meeting held in relation to the year under appeal and had informed the AO that as per the laws prevalent in Singapore,the assessee was required to hold only one board meeting.Though the AO and the FAA had mentioned tha .....

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in India.We have gone through the e-mails placed by the assessee at pg No.96 to 127 of the paper book which clearly prove that business activities were carried out by the Singapore office.In our opinion,factors like staying of one of the directors in India or holding of only one meeting during the year under consideration or the location of parent company in India in themselves would not decide the residential status of the assessee.The assessee had received substantial portion of its income fr .....

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